Waystar Holding Corp.(WAY) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Waystar reported Q1 revenue of $256 million, reflecting a 14% year-over-year increase and an adjusted EBITDA of $108 million, which is a 16% increase year-over-year [7][26][19] - The adjusted EBITDA margin was 42%, aligning with the long-term target of approximately 40% [29][19] - The net leverage ratio at the end of Q1 was 2.5 times, indicating a decrease of approximately a quarter turn in the quarter [30] Business Line Data and Key Metrics Changes - Subscription revenue increased by 18% year-over-year and 3% sequentially, while volume-based revenue grew by 11% year-over-year, with an adjusted growth rate of approximately 12% [27][28] - The number of clients generating over $100,000 in trailing twelve-month revenue increased by 15% year-over-year to 1,244 clients [11] Market Data and Key Metrics Changes - Waystar serves over a million US-based providers across various care settings, indicating a broad market presence [8] - The company reported a 114% net revenue retention rate, which is above the typical range of 108% to 110% experienced over the past three years [26][11] Company Strategy and Development Direction - Waystar is focused on sustainable revenue growth, operational profitability, and innovation through its cloud-based software platform [10][19] - The company is pursuing a strategic software product roadmap that emphasizes scale, automation, and substantial ROI, including the recent launch of Altitude AI [13][66] - Waystar aims to leverage generative AI to enhance operational efficiency and reduce costs for clients, positioning itself as a leader in the healthcare payments sector [86][90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong performance despite macroeconomic volatility, citing the recession-resistant nature of its business model [8][30] - The company anticipates no major impact from potential new healthcare policies in 2025, suggesting that reliance on software platforms like Waystar's will likely increase [9] Other Important Information - Waystar's software platform is designed to help providers optimize cash flow and reduce administrative costs, which is critical in challenging economic conditions [8][9] - The company has maintained high cybersecurity standards and regularly audits its platform against industry-leading frameworks [19] Q&A Session Summary Question: Breakdown of Q1 outperformance and guidance components - Management indicated that strong patient payment utilization contributed to Q1 performance, with 98% of revenue generally coming from contracted solutions [34][35] Question: Drivers of net revenue retention at 114% - The retention rate was influenced by robust bookings from revenue cycle solutions and strong client advocacy leading to cross-sell opportunities [40][41] Question: Trends in utilization and seasonality - Management noted that utilization has trended above historical averages, benefiting the business model, with minimal seasonality in provider solutions [45][51] Question: Impact of security and implementation time on sales cycles - The company has seen strong demand and robust RFP activity, with clients prioritizing mission-critical solutions during economic uncertainty [53][56] Question: RFP activity and tariff impact - Management reassured that Waystar has no direct exposure to tariffs and continues to see strong demand for its AI-driven solutions [59][62] Question: AI's impact on market share and client relationships - The company views the trend of bringing outsourced RCM back in-house as beneficial, allowing for expansion of addressable market opportunities [84][90] Question: M&A strategy post-leverage target achievement - Waystar is actively pursuing M&A opportunities that align with its business model, focusing on technology, people, and clients that fit its objectives [101][104]